Fast Track Interview

Adrian Bye: Today, I am talking to Rob Jewell, who is the CEO of Gratis Internet. Gratis has actually created a lot in the Internet marketing space. Rob, tell us a little bit of who you are and what it is you do.

Rob Jewell: I am the CEO and co-founder of Gratis Internet. We started in 2000. As our company tag line says we come up with creative ways to connect consumers with advertisers online. I started the business with a buddy of mine in a one bedroom apartment in DC. I was 23 and almost right out of college. We boot-strapped it by Visa and MasterCard with three or four credit cards that we maxed out to about $20,000. The original idea was our first website FreeCondoms.com.

Adrian Bye: Did you have any experience with Internet marketing before?

Rob Jewell: We always had an interest in the Internet and websites even though we didn’t do a whole lot online in college. We didn’t have any experience in online marketing. I thought if there is a way we could give out free condoms online, it could be successful. We jumped into it and knew that we would find a way whether there was a sponsor from one of the condom companies or advertisers to support it.

We discovered online advertisers like Pay Pal. They would pay us $20 for a customer that signed up for a free Pay Pal account. We would send users to Pay Pal and say, “sign up for a free Pay Pal account, and we’ll give you a condom sample pack.” We started driving customers through our website to Pay Pal, E-bay, and Visa Next card.

Adrian Bye: Have you heard of this model before?

Rob Jewell: I believe, oddly enough, we were actually credited with starting the incentive marketing industry. Models were out there that we soon discovered like NetFlip that started prior to us and gave away cash for completing offers. We were the first company to give away products.

We were just doing condoms for about two or three years. It was going very well and was profitable from the start with a couple of million dollars a year in revenue. But I’m an entrepreneur, and as I see opportunities to grow, it’s tough to hold back. Right around the two or three-year mark, we realized, why limit it to just condoms? At that time, we had a whole fulfillment center that we were running. We thought let’s outsource all of this; let’s be online marketers. That’s when we launched a lot of these other products and started to see some major growth. We started FreeDVDs.com. We went into video games and CDs after that.

In the summer of 2004, we launched FreeiPod. We decided that completing 25 offers sounded too hard for a user. We could make them complete one offer and then have them refer five friends to also complete an offer. We thought that we had to watch the economics closely but that it could work by combining all of the bounties we were getting from the advertisers and give away a high-priced product like an iPod.

Adrian Bye: What were your costs for iPod, and what did you expect to make in terms of bounties?

Rob Jewell: The costs were about $300 each at that time. On average, we were probably making about $40 per offer completion. We also knew that not everyone would refer five friends while some would refer more than five. In May 2004, we went from doing about $300,000 in revenue a month to $3 million a month in a matter of 60 days.

We were young and fairly inexperienced, but we knew we were onto something. We decided to work hard to build a foundation under the business, so we could be successful for a long time on online marketing space. We went from eight people to a peak of about 35 people at the beginning of last year. By the time we were at the peak headcount, the core business definitely softened up quite a bit. We had a foundation of people underneath us, but we didn’t have the innovation during that period of time because we were so strapped for resources. We reduced our head count back down to about 18. Then we started really driving on some new innovative business ideas from which we’re just starting to reap the rewards.

In 2005, we made a decision to go international. Most of our business today is done internationally. We were one of the first movers into the UK, Australia, Germany, and other parts of Europe and Canada.

Adrian Bye: That’s your direction now to take incentive marketing internationally.

Rob Jewell: Our assets are all the advertisers that were blown away with the kind of volume that we were doing with them. We knew that we can leverage these advertiser relationships all over the world as U.S. companies started realizing that they need to go international. In the last six months, we’ve launched a number of products to take advantage of that. We’ve launched an affiliate network called Gratis Network. It is a boutique of affiliate networks focused on international countries and large successful advertisers. We know they are successful because we have our own network of websites that we test them on before we release them on our Gratis Network.

Adrian Bye: You guys really took over a lot of volume with the economics of your model. How did you always know that those leads worked and that they always backed up in the way they should?

Rob Jewell: We knew the key to the game is to be able to do a media buy and within a few hours know if that media buy is going to be successful. We worked with mathematicians and our developers to create an innovative solution based on revenue per clicks from advertisers; we rolled that up, and created a present value of the user. It gave a very good indication of how valuable that user was over a lifetime and how active they were. We did not necessarily know how much revenue right away, but we could predict that with some of the equations and projections we put in to our reporting systems.

Adrian Bye: How were you getting most of your traffic initially? Was it viral? Was it buying media?

Rob Jewell: When we launched FreeCondoms, we actually started out with the viral model. We put a “refer a friend” form on the site, and we said, “For every friend you refer, we’ll give you a free condom.” They just had to refer a friend on the site who registered, and we would give them a condom. If you brought in 10 friends, we’d give you 10 condoms. That’s really how that website grew.

We didn’t do hardly any media buying on that website for the first six to 12 months, and we were profitable within three months. When FreeiPods launched, it was based on the viral model as well. We had users emailing other users. It was quite a wave of viral traffic.

Adrian Bye: Then you moved on to doing CPA, CPM and everything else. Did you handle all the media buying yourself?

Rob Jewell: In the beginning, we did it all ourselves, and we actually built an internal publishing system, much like an affiliate network, to manage all the buys. We were one of the first incentives to actively buy media on Google, and it was very profitable. On Google, we were probably spending $50-100,000 a month in 2002 or 2003.

We’re actually experimenting with FreeCondoms again. We shut down FreeCondoms when FreeiPods took off because it was on an old code base. We launched it again because the timing is right to bring this model back to life in the United States. We launched a facebook application on Facebook called FreeCondoms. We’re still playing with a lot of things. It’s not a huge focus for us. It’s more of an experiment. It’s not doing hardly any volume right now, but I think it will be interesting to see what happens.

Adrian Bye: When I browse the web from outside the USA, all I see are smiley ads. What are you actually doing in monetizing international that works?

Rob Jewell: We launched the affiliate network or Gratis Network that allows more sophisticated guys moving internationally to pull offers from us and optimize all the offers the way they want. We’ve had a product called Redirect Ads that we’re getting ready to formalize and launch to the next level. Basically the product allows us to give a U.S. company with a lot of international traffic a turn key solution to send us all of that traffic. We’ll then segment it and target it to the appropriate advertising offers in the appropriate country by vertical. We focus our efforts on monetizing those really well where people have the most traffic. As more traffic comes in, we monetize that.

We’re getting offers from affiliate networks and advertisers all over the world with whom we have a relationship. We’ve been shifting through these advertisers for two years now. We know what works and what doesn’t work because we test it on our own sites.

We’re seeing much higher growth rates in other countries than we are seeing in the United States right now. A lot of people weren’t having success with international traffic because they didn’t know what to do with it. They’re sending it to Smileys. They’re sending their traffic to just one offer because it’s easy and it takes all countries. I can guarantee you that we can offer far more than smileys. We actually look at what country they’re coming from and send it to a higher eCPM ad in that country.